Lakeland Industries, Inc. (LAKE) Q1 2021 Results - Earnings Call
Lakeland Industries, Inc. (NASDAQ:LAKE) Q1 2021 Earnings Conference Call June 5, 2020 4:30 PM ET
Company Participants
Charles Roberson - President & CEO
Allen Dillard - CFO
Conference Call Participants
Michael Legg - Benchmark
Alex Fuhrman - Craig-Hallum Capital Group
Gerry Sweeney - ROTH Capital
Operator
Good day, ladies and gentlemen, and welcome to the Lakeland Industries First Quarter 2021 Financial Results Conference Call. All lines have been placed in a listen-only mode and the floor will be open for your questions and comments following the presentation.
Before we begin, parties are reminded that statements made during this call can contain forward-looking information within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. Forward-looking statements are all statements other than statements of historical facts, which reflect management's expectations regarding future events and operating performance and speak only as of today June 9, 2020.
Forward-looking statements are based on current assumptions and analysis made by the company in light of its experience and its perception of historical trends, current conditions, expected future developments and other factors that believes are appropriate under circumstances.
These statements are subject to a number of assumptions, risks and uncertainties that are factored in the company's filings with the Securities and Exchange Commission; general economic and business conditions; the business opportunities that may be presented to you and pursued by the company; changes in law or regulations; and other factors, many of which are beyond the control of the company.
Listeners are cautioned that these statements are not guarantees of future performance and the actual results or developments may differ materially from those projected in any forward-looking statements. All subsequent forward-looking statements attributable to the company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements.
At this time, I would like to introduce your host for this call, Lakeland Industries Chief Executive Officer, Charles Robertson, and Lakeland's Chief Financial Officer, Allen Dillard. Mr. Roberson, you may begin.
Charles Roberson
Thank you. Good afternoon to you all, and thank you for joining our fiscal 2021 first quarter financial results conference call. I'm joined today by Lakeland's Chief Financial Officer, Allen Dillard.
During our yearend conference call we talked about Lakeland expanding and transforming to advance its leadership position in the global Personal Protective Equipment or PPE market. We believe our results for the first quarter of fiscal 2021 validate our commitment to leveraging our diverse manufacturing facilities and resilient supply chain, with our new centralized data driven planning systems to propel Lakeland into a leadership position within the global PPE market.
With our first quarter fiscal 2021 performance, there should be no question that we have the necessary personnel, facilities, equipment, supplier relationships and vision to be at the forefront of this elite group. Challenged by pandemic of unprecedented proportion, our people rose to the occasion aided by our investments in manufacturing facilities and information technology.
As a result with our performance in the first quarter, we provide a glimpse of what our financial performance could be, as we utilize our materially improved financial position to continue process and systems improvements throughout Lakeland, and work to expand and develop our manufacturing capabilities for the future.
More importantly, we provided relief amid the COVID-19 outbreak, both here and abroad. We're grateful to our global workforce and management team for their dedication to their coworkers, our customers and those in need. Their adherence to our safety protocols, at work and at home, and their willingness to work extended hours, led to record quarterly sales which increased by an impressive 85% to nearly $46 million.
Leveraging our newly centralized operating systems and emerging data-centric planning processes, we were able to respond to the demand for our products relating to the COVID-19 pandemic, while continuing to support and expand our traditional industrial customer base. Globally in the fourth quarter, we have added in excess of 150 new industrial end users, with demand resulting from shortages that are attributable to increased COVID-19 demand, but not necessarily associated with COVID-19 applications. While over 180 new customers were added in the healthcare and pharmaceutical sectors for what we believe are orders relating directly to coronavirus defense.
Gross margin and profit also were at record levels. Several factors contributed to our increase in gross margin. These include higher prices for new customers. Many of these new customers were unable to secure products from other manufacturers amid the stress of dealing with COVID demand. But because we own our manufacturing, and have built a durable and flexible production platform, we were able to flex and deliver when others could not.
You've heard us say this before and we can't say it enough, as a branded PPE provider, we are unique in owning our manufacturing facilities around the world. We do not rely on outsource contractors, and therefore own our supplier relationships and can shift our manufacturing in a matter of weeks, sometimes within days. We do not require months as is frequently the case with contractors. This important differentiator enabled us to scale our production output to achieve if not exceed our organic growth targets, while contributing to the global pandemic response for emergency protective apparel.
Coronavirus related demand added approximately $11.2 million to our fiscal 2021 first quarter sales. Approximately $6 million of these orders were fulfilled with products already in inventory. Gross margins benefited from improved manufacturing efficiencies, resulting from a management decision to limit our product offering to only a few core styles during the pandemic period. This increased our manufacturing throughput beyond the increase in manufacturing capacity due to extended plant operating schedules.
Gross margins also benefited from sales of inventory that had been fully or partially reserved in previous periods. On a consolidated basis for the first quarter gross margin as a percentage of revenue reached a record 48.6%, compared to 30.6% in the prior year period and 37.7% in the fourth quarter of last year, when we had $1 billion of COVID-19 related sales.
The primary elements of our fundamental gross margin improvement strategy include: development of flexible manufacturing capacity, increased market penetration into high value markets, significant improvement in manufacturing efficiencies, and extension of higher margin product lines into foreign markets. In our first quarter of fiscal 2021, sales volumes and factory floor utilization contributed to our record gross margin.
Having previously built up staffing and inventory over the preceding 18 to 24 months in anticipation of potential disruptions while deploying a new ERP system, we drew down the staffing in the middle of last year. With the higher inventory levels, we were able to deliver on COVID-related demand and post record revenues, as I mentioned a moment ago.
In fact, a majority of the COVID-related orders were fulfilled with products already in inventory, enabling us to attain a sales volume that is significantly above our normal manufacturing capacity and not sustainable quarter-over-quarter.
Finally, amid this incredible demand environment, we reduced the number of SKUs or product variations in our offering. This enabled our manufacturing staff to improve yields and manufacturing efficiencies, as we focused on fewer products for larger runs. We were able to make quick decisions in the quarter due to the business intelligence and production planning tools afforded us by our new ERP system. In turn, we experienced greater efficiencies and factory floor utilization to drive incremental gross margins on a percentage basis and in dollars.
Given all of the aforementioned, gross profit in dollars set a quarterly record at $22.1 million in the first quarter of fiscal year 2021, a 190% increase from $7.6 million for the same period of the prior year, and up 108% from $10.6 million in the fourth quarter of fiscal year 2020.
As previously disclosed, in anticipation of continued heightened demand relating to COVID-19, we commenced manufacturing capacity expansion efforts. More recently, we encountered significant price increases in available raw materials and briefly adjusted our manufacturing schedules in Vietnam and China, from a maximum schedule of 12 hours per day, to a normal schedule of 10 hours per day for disposable products, until we could confirm the level of demand at those higher prices.
We have since returned to a maximum capacity operating schedule. As raw material prices increased, we pass those increases on to customers, which led to some deferral or reducing of speculative orders. Still, while we last reported order backlogs, filling our manufacturing capacity through July and August for some products, we are now quoting deliveries out to August and September and continue to develop significant new accounts for the second-half of the year.
Benefiting from higher sales, elevated gross margins, resilient manufacturing capabilities, and effective management of operating expenses, our operating leverage was magnified. Our pre-tax operating margin was in excess of 27%, another record as compared with less than 6% in each of the last two fiscal years.
Net income in the first quarter jumped to a record $8.6 million, up from a loss in the prior year. With this high level of profitability and minimal capital investment, we paid off our remaining debt and added $9 million to our cash balance to end the quarter with $23.5 million in cash, or about $2.95 per share in cash.
While COVID-19 has presented unprecedented conditions that have materially improved our financial position. We remain on a higher trajectory for organic growth and are building an environment of global operational excellence, that will benefit our financial performance and organic market share attainment for the foreseeable future. COVID-19 likely will impact our business through the entirety of fiscal 2021.
We anticipate continued strong demand through Q2, and believe that higher than normal sales will continue into Q3. We believe that once the pandemic subsides, there will likely be secondary government driven demand, as governments around the world seek to replenish and perhaps increase their PPE stockpiles prior to a possible second wave of virus outbreak in the fall. The timing for this as always in crisis situations and the aftermath is uncertain. Some RFQs from government agencies have already been released, while others may take up to a year to surface. Additionally, we believe the private sector will also engage in stockpiling of PPE as supply channels catch up to demand.
And finally, we are seeing the emergence of institutional cleaning as a new market segment as countries, states, municipalities, schools, sports and entertainment complexes, the travel industry, private businesses and building owners reopen and seek to prevent any type of infection, whether it be from COVID-19 or some other outbreak.
For the financial analyst and other investors among our listeners, it is an imperfect exercise to attempt to eliminate the positive and negative effects of COVID-19 to arrive at a normalized first quarter financial performance for Lakeland. Pandemic response equates to healthcare on an industrial scale, and as such sales are for the most part may through our ordinary distribution channels and are not distinguishable from regular business, unless the distributor discloses the end user or application, which they are not normally prone to do and are even less so, during times of allocated supply.
The takeaways for Lakeland are that we have developed a resilient and flexible global manufacturing platform, a diversified and expanding customer base, growing brand power for high-quality competitively priced PPE, and exceptional balance sheet and an operating model with tremendous leverage.
That concludes my remarks. I will pass the call to Allen to provide a more thorough review of the company's financial results.
Allen Dillard
Thank you, Charlie. The following addresses my review of the financial results for our fiscal 2021 first quarter, ended April 30, 2020.
Net sales for a record $45.6 million for the three months ended April 30, 2020 as compared to $28.2 million for the three months ended January 31, 2020, and $24.7 million for the first quarter of last year. For the fourth consecutive quarter, our revenues have exceeded $27 million.
Coronavirus-related demand as best we can tell, added approximately $11.2 million to our fiscal 2021 first quarter, and approximately $1 million in our fourth quarter fiscal '20 sales. For a more balanced view of our financial performance with COVID demand contributions in both first quarter '21 and fourth quarter '20 period, but not in our first quarter '20 period, I'm including certain fourth quarter '20 numbers for comparison purposes, where it might be more helpful.
On a consolidated basis for the first quarter of fiscal 2021, U.S. sales were $23.1 million or 51% of total revenues, and international sales were $22.5 million or 49% of total revenues. This compares with U.S. sales of $12.9 million or 52% of the total, and international sales of $11.8 million or 48% of the total in fiscal 2020. While our revenues are significantly larger, our business remains very well-balanced from a geographic diversification standpoint.
Drilling down in fiscal first quarter '21 versus first quarter '20, sales in the U.S. increased by approximately $10.2 million or 80%, while international sales increased $10.7 million or 90%. Among our major international operations, sales in the UK were $3 million versus $2.4 million last year, sales in Mexico more than doubled to $1.4 million from $600,000, sales in Asia were up 136% and over $9 million from $3.8 million, Canada sales of $4.3 million were up from $2.5 million, and Latin America increased to $2.4 million from $1.7 million.
Now let's look at our product mix diversification. Disposables, which continue to be our largest product group increased by nearly 153% or $18.9 million to $31.2 million from $12.4 million last year. Chemical sales were up 75% or nearly $4 million to $8.9 million from $5.1 million last year. Both product groups benefited from organic growth, as well as significant COVID-19 demand.
Flame Resistant or FR products grew modestly to $1.5 million from $1.4 million. Gloves were just slightly higher in nearly $800,000. High performance wear products, our newest line, which is marketed to utility companies and similar organizations were up nearly 25%. But this is still a small component of our overall business.
And large part our channel check suggests that PPE purchasing was focused, if not refocused, in the immediate-term to pandemic efforts at the expense of certain traditional industrial usage. Furthermore, during a significant duration of our first quarter, certain end market customers, such as those in the construction industry and the automotive sector, which typically contribute about 10% or more for our annual revenues were shut down voluntarily or by government mandate.
The energy sector also has had some disruption as we addressed in our fourth quarter commentary. So we're keeping a close watch on this segment. Although, we are not reporting any meaningful changes in sales that occurred in the first quarter.
As a result of the aforementioned issues, we experienced year-over-year declines in sales for our wovens and high-visibility or reflective product groups. As of June, certain of these trends including workplace closures and purchasing of disposable and chemical garments over other product groups in the wake of the pandemic have persisted.
Moving onto gross profits, gross profit of $22.1 million for fiscal 2021 first quarter increased by $14.5 million or by 190% from $7.6 million for the same period of the prior year. Gross profit as a percentage of net sales was 48.6% for the fiscal 2021 first quarter, an increase of 18 percentage points from 30.6% in the prior year period and 11 percentage points from 37.7% in the fourth quarter of last year, when we had $1 million of COVID-19 related demand. Charlie reviewed the key drivers for our gross margin improvement, so I won't repeat those comments.
With our substantially higher sales volume and gross margin contributions to leverage and our operating model drove substantial increases in profit and cash flow. As expected under the circumstances, operating expenses increased in the quarter, but decreased as a percentage of revenue. OpEx increased 24% to $9.8 million for the three months ended April 30, 2020 from $7.9 million in first quarter fiscal '20 and $8.9 million in fourth quarter fiscal '20.
Operating expenses as a percentage of net sales was 21.6%, for the three months ended April 30, 2020, compared to 31.9% in first quarter '20, and 31.6% in fourth quarter '20. The increase in operating expenses primarily relates to higher shipping and commissions and compensation related to the higher sales volumes, partially offset by reduction in travel and other associated expenses year-over-year.
Lakeland reported operating profit of a record $12.4 million in first quarter '21, up from a loss of $315,000 in the prior year period and a profit of $1.7 million in fourth quarter '20. Operating margins were 27.1% for the first quarter of 2021, 1.3% loss for the prior year period and 6.1% in fourth quarter 2020. All major operating regions were profitable in the first quarter of fiscal '21, which shows a slight reversal for Mexico, which was the only unprofitable major country operation in the fourth quarter of fiscal 2020.
On the higher pre-tax income, overall taxes increased tax expense consists of federal state and foreign income taxes. Income tax expense was $3.7 million for the first quarter of fiscal '21, as compared to $100,000 in the first quarter of fiscal '20. As a reminder, we have substantial tax yields pertaining to our U.S. and corporate income tax. However, we are subject to taxation on profits of certain of our foreign subsidiaries.
Lakeland's net operating loss for federal purposes is estimated to be $6.6 million at April 30, 2020, down from approximately $15 million at the beginning of the fiscal year. First quarter fiscal '21 net income was $8.6 million or a $1.08 per basic and a $1.07 per diluted share, compared to a net loss of $465,000 or $0.06 per basic share in the prior year. The improved results reflect higher sales and margin expense management and the enhanced operating efficiencies leverage and factory utilizations.
The company had 7,972,423 basic shares outstanding at April 30, 2020. We did not repurchase any shares in the first quarter as a part of the company's $2.5 million stock buyback program that was approved in July of 2016. As a reminder to-date we have spent $1.7 million to repurchase shares and still have over $800,000 remaining available in that buyback program.
As of April 30, 2020, Lakeland had cash and cash equivalents of $23.5 million, up from $14.9 million at the end of fiscal 2020. Inventories were reduced by $6.7 million from the beginning of the fiscal year, due largely to a sale through of sealed seam finished goods driven by COVID demand. This product line remained slightly below normal stocking levels in all of our warehouses around the world. And we are now quoting deliveries into August and September for new orders in many cases.
As we have stated, we are servicing coronavirus orders only to the extent that we have capacity beyond what is required to service our traditional customers and organic growth targets. We believe this process of upholds our long-term growth strategies, supports our commitment to our customers and contributes to the COVID-19 response.
Accounts receivable at quarter end increased by nearly $7.6 million due to higher sales, as DSOs remained steady at approximately 50 days. Accounts payable and accrued expenses decreased by approximately $1 million. And shareholders' equity was increased by $8.5 million. Total Assets increased $8.3 million in the quarter from $99.4 million to $107.7 million.
The company has essentially no debt outstanding at April 30, 2020, which resulted from paying off the $1.2 million term loan that we had at January 31, 2020. The company has no borrowings outstanding on its $20 million revolving credit facility. The company is currently negotiating a new revolving credit facility agreement that will provide even greater financial flexibility and reduced administration.
Working capital was $77.9 million at April 30, 2020, increased from $66.9 million at the beginning of the fiscal year. Capital expenditures were approximately $200,000 during the first quarter of fiscal 2021, flat from the prior year period. CapEx for the year is expected to be approximately $2 million as compared with $1 million in fiscal '20 and $3.1 million in fiscal 2019. The majority of our CapEx in the current fiscal year will be for strategic capacity increases as needed, continued enhancement of our manufacturing efficiencies and extending the phased rollout of our ERP system.
Adjusted free cash flow in first quarter '21 was $11.9 million, an increase of over $12 million from the prior year period, driven by higher sales margins and operating efficiencies, as cash expenditures in both periods were approximately flat.
That concludes my remarks. I will turn the call back to the operator to open the call to questions.
Question-and-Answer Session
Operator
Thank you. The floor is now open for your questions. [Operator Instructions] We'll go first to Michael Legg with Benchmark.
Michael Legg
Congratulations, guys. It's nice to see you well-prepared to handle this pandemic, and clearly, the results are showing that. Couple questions. First, you mentioned briefly the current quarter is continuing to see strength from COVID. Could you kind of compare the strength you're seeing now to the strength you saw during you just reported April quarter? And on top of that, with the $23 million cash plus all the other cash availability you have, I've seen you talk about increasing capacity 150%. Could you talk about timing of such and how you see that? If today's running at full capacity is going to put that off or how that looks?
And then the last question just on pricing. Obviously, you can pass through the price increases on the raw materials to your customers, but can you talk a little bit about longer-term pricing strategy? Thanks.
Charles Roberson
Thank you, Michael. We appreciate your initiating coverage of Lakeland and welcome you to your first Lakeland earnings call as a covering analyst.
Michael Legg
Thank you.
Charles Roberson
Welcome aboard. So, to your questions, the strength that we're seeing in Q2 compared to Q1, I think the best way to characterize it is, it is not quite as chaotic, though the demand is still quite high. Q1, I would characterize by a lot of people jumping into the market and spiking the demand very quickly. People thought that they could make masks, they found out when they tried to ship them into various places around the world that they didn't have the quality required. So some of that demand, well, that demand has begun to dissipate. We're seeing the impact of that on raw material supply. Raw materials are still available though with increased pricing, but availability has become a little bit more healthy.
I think the departure of the opportunists that participated in Q1, with regard to demand for raw materials and filling it has now been replaced by governments and institutions that are seeking to stockpile product before the fall in anticipation of a potential second wave. We've seen a number of surprisingly large RFQs come out in the last couple of weeks. And there's even some confusion in those RFQs right now, but the quantities that we're seeing, quite frankly, and the delivery times the raw materials aren't available to meet those. So we see that demand being pushed out into subsequent quarters, just simply because the raw material supply is not there right now.
So, I think that takes care of your first question. As far as our using cash to acquire more capacity, because of my answer to the first question, we obviously are seeking to do that as rapidly and as efficiently as we can, as to how much we can add. We are somewhat hindered in the application or adding a capacity, because travel is limited because of the pandemic, so that makes bringing new sites online, getting sellers trained is problematic for that. And we're working to develop methods around that problem as we speak.
And what was the third?
Allen Dillard
Pricing.
Michael Legg
Just long-term pricing.
Charles Roberson
Right. Our strategy -- unfortunately, we're watching a certain part of the lower end of product lines become commoditized. Our strategy to face that up until COVID-19 was to deemphasize our sales efforts on our disposables and focus moving to the utilities and fire service and woven products, which are higher margin products to begin with. There's a lot more value added and they're more expensive products. We are fortunate to have a very good sales team in that area and a good product designer, actually two good product designers. And we have product offerings assembled that are currently launched.
Unfortunately, the pandemic has somewhat dampened interest in those lines. Electric utilities normally have semi-annual stipends to their workers for FR garments, that really didn't happen this spring, as they were putting them in disposables, they were more worried about staying up and running and operational and letting people use last year's FR garments.
So our strategy is product related and moving to higher end product lines and exporting those into foreign markets, because right now they're centralized in the U.S.
Michael Legg
And just one follow-up on the capacity. What is your current run rate now, the capacity you're running at on a revenue basis?
Charles Roberson
Michael, that's not something I want to put out in public for competitive reasons. In terms of putting a dollar figure on that, plus it's highly variable. In Allen's remarks, I think he demonstrated how much of our woven capacity we can shift over to non-wovens to grow that part of the business. So it's highly variable.
Michael Legg
Okay, great. Thank you. Congratulations on a great quarter and continued success.
Charles Roberson
Thank you.
Operator
We'll go next to Alex Fuhrman at Craig-Hallum.
Alex Fuhrman
Thank you very much for taking my question. And congratulations on a really tremendously strong quarter. I'd love to ask about the new customers that you think you've been gaining here lately as a result of product shortages stemming from COVID. It sounds like you're picking up a lot of customers both on the healthcare side of things, as well as customers that that aren't necessarily directly involved in combating the pandemic. So we'd love to just get a sense of how you're coming to the determination that you've picked up these new end users and what sort of categories then these end users fall in?
And then as you kind of think ahead over the next year or two, do you think that there is a strong likelihood that a lot of these end users will continue to use Lakeland products in 2021 and beyond? I know, I still remember you picked up a lot of business like that, coming after Ebola and bird flu. Just curious if you've had conversations with some of these new customers and how likely you are to be supplying them in the future after the pandemic?
Charles Roberson
Alex, the new customers that we're seeing and we've discussed it in the comments fall into basically two categories. Industrial, which are largely accounts that have come to us for their regular business. Their traditional suppliers were not able to meet their demand. And we know it, because we've tried to sell to them for years. These are accounts that we have wanted for a very long time. And we took advantage of our ability to continue a source product in our inventory to get in and service them. We were selective about the accounts that we did service and tried to only service accounts that we thought would be sticky.
Now whether we will keep all of their business, we're certainly going to try to do that. But at the very least, in the largest of the customers that we've talked with, they have stated that they will no longer be exclusive to their previous supplier, which we're taking to mean, they're going to keep the door open. We were there for them through this pandemic and they're not going to be caught sole supplier again.
On the other side of it, we had the healthcare and pharmaceutical part of the business that goes into our new clean room business model, which is the higher end of disposables. That actually isn't so much replacing competitors' products, as it is accelerating the acceptance of our products into certain facilities. Once you're accepted, they had such significant problems with supply through this pandemic. They are going to keep multiple suppliers. And they are going to turn product through all of them.
So, we do think that a lot of what we have taken is going to stick certainly at all won't. And I think as time goes out in the future for whatever reasons that some people may leave. But I've got to give it to our sales team, I think that they've been highly selective as who they picked. And I'm pleased with their choices.
Alex Fuhrman
Great. That's really helpful. Thank you. And then if I could just ask about your inventory position. I know that you had too much inventory for a lot of 2019 and we're working that down. You now have the lowest level of inventory that the company has had in about three years. Is that a sufficient amount to be able to service the demand you're seeing here? Should we expect to see your inventory levels build back up over the course of the year?
Charles Roberson
I think we have to look at that as to where the inventory is. Previously, the inventory that you were talking about for the last couple of years it was very high was in finished goods. That's not where we want to carry our inventory at all. And fortunately, that is where much of our depletion occurred.
In a time like this, where raw materials are a concern, we've actually brought in more raw materials. If we expand and open up another manufacturing facility somewhere else in the world that will also increase our raw materials. We don't see raw materials is problematic inventory. It is the finished garments that we're seeking to control. And, quite frankly, we're not going to add inventory, finished goods inventory back in beyond our current levels willingly.
People are going to have to justify that inventory if they want us to carry it, because we think that operating as close to our manufacturing facilities with regard to product sales, that maximizes our financial leverage.
Alex Fuhrman
That's terrific. Well, thank you very much. And thanks for everything you're doing to get the economy back up and running.
Charles Roberson
Thank you, Alex.
Operator
We'll now take our next question from Gerry Sweeney at Roth Capital.
Gerry Sweeney
Hey, good afternoon, Charlie and Allen. Thanks for taking my call and congratulations on a great quarter.
Charles Roberson
Thank you.
Gerry Sweeney
Just want to talk about the new customers. I think 150 on the industrial side, 180 on the pharma side. Is there any way you can -- I mean, to some degree, these are just numbers, but is there any way you can sort of benchmark it about, this is a 10% increase in potential industrial customers or 10%, they could take 10% additional revenue? Just trying to create a little bit of a bracket to understand exactly how much growth you saw not just on customer count but on revenue side? I know it's not an easy question. But…
Charles Roberson
Yes. I will say this, just like we service the COVID-19, we service that largely from our inventory, and we tried to use our manufacturing capacity to take new customers, right? So, I guess the best way to say it is we have tried not to knowingly exceed our manufacturing capacity at maximum to obtain new customers, because where we do exceed that not deliver, we have put ourselves in the same category as their previous suppliers, and we're loath to do that.
Gerry Sweeney
Got it. It makes sense. Okay. I guess that's helpful. And then I'm just trying to figure out, I think in a quarter, there's a few moving parts. So we have about $45.6 million of revenue, $6 million in change, almost maybe $7 million was from the inventory side. So that takes us down to like $38 million, $39 million. But you weren't necessarily running at full utilization for that 12 hour utilization for the full quarter. If we were to sort of be running out of full utilization for that full quarter would have revenue been a little bit higher? I'm just trying to figure out what you could be…
Charles Roberson
You're missing some of the components of the growth. I'll let Allen speak, because he covered it in his comments.
Allen Dillard
Yes. That’s some of the math Gerry, but one of the other things that really helped with the throughput in the quarter was -- to Charlie's comments was the SKU reduction. We were able on a volume basis to push more through the facility, just by reducing the number of SKUs. And to your point, yes, we did have a period during the quarter, where we reduced the operating hours back to normal. And Vietnam and China, as we factored the raw material price increases into the sales operations.
That was a big issue for us, because the price increases that we saw on the material side were very significant. And to Charlie's point, we didn't want to put ourselves in an overhang with very expensive goods, without demonstrated demand and orders on the backend of that. So, your math is good. It's the same math that we've used internally. So I think you could use as a rough model to kind of gauge plus or minus where we might be at full max capacity generally.
Charles Roberson
And to that, Gerry, I would add that. At some point, we're not there yet. We've reduced the SKUs to a pandemic level.
Gerry Sweeney
Yes.
Charles Roberson
Because we need that capacity and so do our customers. At some point as we start to return to a new normal, because that's what it's going to be, it's not going to be like it was before the pandemic. But we will gradually add back some of the SKUs that we kicked out, though it will by no means be all of them. And really, we hope to be able to augment that with additional capacity. So, we don't have any decline.
Allen Dillard
To that part of your question and actually going back to one of Michael's questions. Over half of the CapEx that we did employ in the first quarter was associated with capacity expansion. And you're going to see that spending accelerate. To Charlie's point, we're going to have to manage carefully around what travel limitations present themselves, but we are full speed ahead to as much as we will be allowed to continue that investment and capacity expansion.
Charles Roberson
And raw materials as a consideration in that. Right now, we're not nailed to the ceiling in terms of raw materials demand, but it wouldn’t take a tremendous event a second wave. It wouldn't take much for it to pen against the ceiling again. And if we had just started a new facility, so far, we've been able to get all we have needed. But on a new facility, it depends on where we put it and everything else. But I'd hate to start one up and had a start for raw materials.
Gerry Sweeney
Got it here. Okay. Let me see I think I had one other question to check in. But it may be -- I'll follow-up offline with the other question. But I appreciate it. Thanks, guys. Congrats again.
Charles Roberson
Thank you, Gerry.
Allen Dillard
Thank you, Gerry.
Operator
And that is all the time we have for questions today. I'd like to turn the conference back to Mr. Roberson for any additional or closing comments.
Charles Roberson
Thank you. And we appreciate your participation on Lakeland's fiscal 2021 first quarter financial results conference call. As we look ahead to the balance of fiscal 2021, we continue to be well-positioned as a leading player in the more globally recognized and growing PPE industry. Thank you again for your time, for joining us on today's conference call. And goodbye.
Operator
Ladies and gentlemen that will conclude today's call. We thank you for your participation. You may disconnect at this time. And have a great day.
